Global investment in renewable energy rose nearly a third in 2010 compared with the previous year to a record $211 billion on large wind projects in China and small-scale roof-top solar installations in Europe , the United Nations Environment Program said Thursday in its annual report on the sector.

The figure was up on a revised sum of $160 billion for 2009 and $159 billion in 2008 and was driven by stimulus package funds making their way into the market coupled with government policies, subsidies and targets for the sector, the report said.

Developing countries, led by China but also including India and countries in Africa , drove the increase in spending, overtaking new investment in developed economies for the first time.

"Renewable energies are expanding both in terms of investment, projects and geographical spread," said UNEP Executive Director and U.N. Under Secretary-General Achim Steiner.

According to the report, which was prepared for UNEP by Bloomberg New Energy Finance, developing countries accounted for over $72 billion of "financial new investment" in renewables compared with $70 billion in developed countries.

The report defines financial new investment as spending on utility-scale renewable energy projects, and finance from venture capital, private equity and via public markets. It doesn't include small-scale projects and research and development, where developed economies continue to lead the way in investment.

Last year, China was responsible for $48.9 billion of financial new investment, up 28% on 2009, with asset finance of large wind farms dominating the figures.

"But the developing world's advance in renewables is no longer a story of China and little else," the report said.

In 2010, financial new investment in renewable energy doubled to $5 billion in the Middle East and Africa region, and by 39% to $13.1 billion in South and Central America," according to the report.

The increase in China was driven by a combination of government policy and subsidy support, while rises elsewhere in the developing world were driven by a pressing need for new power generating capacity to meet surging demand and in some cases superior natural resources that can be harnessed for energy, such as solar in the Middle East and wind power elsewhere.

Meanwhile, in Europe , financial new investment declined 22% to $35.2 billion last year due to the recession.

But the drop in financial new investment in Europe was more than offset by a surge in small-scale renewables installation, mostly rooftop solar, in Germany , Italy and the Czech Republic spurred by generous government subsidies and a sharp fall in the cost of photo-voltaic modules.

The small-scale solar market is expected to remain strong this year, despite recent moves by many countries to cut back on the subsidies, the report added.

Challenges to investment in 2010 included weaker gas prices, which encouraged generators in the U.S. , Europe and elsewhere to build more gas-fired power plants and pressured power purchase agreements available for renewable energy projects.

Furthermore, pessimism about future profit growth in renewables companies has resulted in clean energy shares underperforming by over 20% compared with wider indices, the report said.

Activity in the first quarter of 2011 was subdued as investors had rushed to complete transactions by the end of 2010 before attractive subsidy deals expired.

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